The scale of problem debt among families with children

The vast majority of parents try to build normal lives for their children, but too often unmanageable debt wrecks their efforts.

Our new campaign, The Debt Trap reveals the negative effects of problem debt. It can damage a child’s mental and physical health. It can undermine relationships with peers and their school experiences, and cause long-term harm to a child’s life.

Our new report co-created with StepChange Debt Charity, reveals that a staggering number of families with dependent children are currently in problem debt.

The scale of debt in the UK

Our report reveals that 18% of UK households with children are currently in ‘problem debt’ (in arrears on at least one household bill or credit commitment). This equates to almost 1.4 million families across the UK, containing 2.4 million dependent children.

On average, these households owe £3437 or an estimated total of £4.8bn in arrears to service providers, creditors, and national and local government. Around 800,000 households containing dependent children (11%) have missed payments on household bills and 1 million (13%) have missed payments on a credit commitment.

In itself, this is problematic. Our survey found a further 2.9m (38%) households containing dependent children are on the brink of problem debt, struggling to keep up with payments on household bills or credit over the previous 12 months.

This is particularly worrying, as many families continue to experience long-term reductions in household income. As the Office for National Statistics (ONS) reported in January, nominal wage growth below the rate of price inflation has resulted in household real wages falling for the longest sustained period since at least 1964.

What drives problem debt?

Our research showed how debt becomes a problem for families as a result of income shocks (such as job loss) or an increase in expenditure pressures (such as a broken car or washing machine) or a combination of the two factors.

These drivers can lead to:

families taking on credit to pay essential household bills or falling into arrears on payments,

repayments on credit, which had been affordable when it was taken out, becoming problematic.

The Debt Trap report reveals that parents are more at the mercy of these drivers than other groups, since where children must be supported, income is less likely to have the flexibility to respond to an income shock, and when unexpected financial problems strike, having children makes it more difficult to adjust spending to cope with new circumstances.

In many cases it is a combination of different income shocks and expenditure pressures that can lead to debt becoming a problem. Problems at work, in relationships and with health which can lead to sudden falls in income are not mutually exclusive, nor do they ensure that a family will not face a sudden expenditure pressure, such as a broken car, at the same time.

Often one short-term problem on its own can be overcome, but the cumulative impact of experiencing several pressures concurrently, against a background of already stretched finances, can push families over the edge into problem debt that can have a devastating impact on children’s lives.

You can help

We need you to help spread the word about debt's devastating and under-reported impact on children’s lives. Help us end debt's damage to children.